Policy Contents

Summary

Indirect costs (Facilities and Administrative (F&A) costs) are charged to externally sponsored awards, unless specifically prohibited by the funding agency. A percentage of indirect (F&A) costs recovered from sponsored projects is distributed to university entities based upon the affiliation and relative contributions of key personnel to project objectives.

Policy Statement

Indirect (Facilities and Administrative) Cost Recovery

The University at Buffalo (UB, university) will recover the total direct costs and indirect (facilities and administrative (F&A)) costs for each sponsored award unless specifically prohibited or limited by the funding agency. Because indirect (F&A) costs cannot be readily assigned to a particular sponsored project or activity, they must be recovered from funding agencies through the application of the federally approved indirect (F&A) cost rates. All proposals for external funding must include a budget request for indirect (F&A) costs using the appropriate federal indirect (F&A) cost rate.

When a funding agency has a published rate that differs from the federal indirect (F&A) cost rate, the funding agency’s rate will be used. In these cases, the funding agency may allow some costs normally covered under the indirect (F&A) cost rate to be charged as direct costs; these costs should be included in the direct cost budget request.

Principal Investigators (PI) may request approval of a waiver or reduction of the indirect (F&A) rate when the potential benefits are compelling and well-justified. Waivers are only considered under exceptional circumstances.

Annually, the university will determine a percentage to be applied to the indirect (F&A) costs recovered from the preceding fiscal year; the resulting amount will be distributed to the provost, appropriate vice president, or dean, based upon the relative contributions of key personnel to project objectives. The provost, vice president, or dean will determine the appropriate use or allocation of these funds.

The PI is responsible for determining the relative contributions of key personnel, and for representing those contributions as a credit distribution in the proposal. The provost, vice president, or dean must approve the credit distribution prior to proposal submission.

Background

Indirect (F&A) cost rates are established in accordance with the federal government’s Office of Management and Budget (OMB) Uniform Guidance. These rates are negotiated between The Research Foundation for State University of New York on behalf of UB and the Department of Health and Human Services, the cognizant federal agency overseeing the administration of sponsored agreements at UB. Indirect (F&A) cost rates are applicable to all externally sponsored projects funded by federal, state, or private sponsors. The application of these rates allows UB to recover certain costs (for example, but not limited to facilities, utilities, libraries, administration, student services) associated with externally funded research and training activity.

Applicability

Definitions

Credit Distribution

Allocation of an individual’s relative contributions towards project objectives outlined in the proposal; allows the university to recognize and record such contributions, and appropriately distribute recovered indirect (F&A) costs.

Indirect Cost (Facilities & Administrative (F&A) Cost)

The costs of administrative and support functions of the university including general administration and expense, operations and maintenance, building and equipment depreciation, and library expenses. Costs incurred for common or joint objectives that cannot be readily assigned to a particular sponsored project, instructional activity, or any other institutional activity.

Indirect (F&A) Cost Rate

The total indirect (F&A) costs attributable to research are compared to the total direct costs of research to derive the percentage of indirect (F&A) to direct. This percentage, the indirect (F&A) cost rate, is then applied to the direct costs of research and is the means by which the university is reimbursed for indirect (F&A) costs associated with direct cost expenditures. The application of the indirect (F&A) cost rate allows the university to recover some of the costs of doing research that are not readily identified with a particular project or activity, but are necessary for the general operation of the organization and support its research mission.

Indirect (F&A) Distribution Base

A defined group of direct cost expenditures to which the indirect (F&A) rate is applied to determine the total indirect (F&A) costs of a sponsored project. The two most commonly used distribution bases are Modified Total Direct Costs (MTDC) or Salary and Wages (S&W) however, some non-federal sponsors may have developed other distribution bases such as Total Direct Costs (TDC).

S&W - the direct salary and wage expenditures of the sponsored research agreement.

Key Personnel

The Principal Investigator (PI) and other individuals who design, conduct, and report research, or who contribute to the scientific development or execution of a project in a substantive, measurable way, regardless of compensation.

Principal Investigator (PI)

A UB faculty or staff member who bears responsibility for the intellectual leadership of a project. The PI accepts overall responsibility for directing the research, financial oversight, and compliance with relevant university policies and sponsor terms and conditions.

Sponsored Project

Any externally funded research, training, evaluative testing, or public service activity directed by UB faculty or staff as part of their university work that requires the university to perform a specified program or deliver a specified product.

Responsibility

Vice President for Research and Economic Development (VPRED)

Review requests for indirect (F&A) waivers and approve only those that have exceptional circumstances and potential benefits that are compelling and well-justified.

Review and approve requests for changes to credit distributions that do not affect a prior fiscal year indirect (F&A) distribution, and for which appropriate prior approvals have been obtained.

Vice President, Dean, Chair

Approve the credit distribution indicated in the proposal.

Review requests for indirect (F&A) waivers and endorse only those that have exceptional circumstances and potential benefits that are compelling and well-justified. Forward to the VPRED for final review and approval.

Review and endorse only those changes to credit distributions that do not affect a prior fiscal year. Submit to the VPRED for final review and approval.

Principal Investigator

Include the appropriate indirect (F&A) costs in all proposals.

Determine the relative contributions of key personnel and represent those contributions as a credit distribution in the proposal.

Provost

Annually, in conjunction with senior university leadership including but not limited to, the VPRED, the Vice Provost for Academic Planning and Budget, and the Vice President for Finance and Administration, approve the indirect (F&A) distribution percentage.

Sponsored Projects Services

Annually, provide Financial Management with a report that indicates the percentages of indirect (F&A) dollars that should be distributed to each decanal area.

Procedure

Prepare a budget which provides for the recovery of total costs for each sponsored program administered by the RF and UBFS. The budget must include full indirect (F&A) costs that are calculated by multiplying the direct cost base by the indirect (F&A) cost rate. In all but exceptional circumstances, the total budget, including full indirect (F&A) costs, will be the budget proposed to the external sponsor.

When potential benefits are compelling and well-justified, the PI may submit a Request for F&A (Indirect) Cost Waiver. The waiver must be endorsed by the department chair(s) and the cognizant dean(s), and forwarded to the VPRED.

When a not-for-profit sponsor has a published rate that is used for all awardees and differs from the federal indirect (F&A) cost rate, the sponsor’s rate should be used; an indirect (F&A) cost waiver is not required. However, a waiver is required if the indirect (F&A) cost rate to be charged is below the sponsor’s published rate. When a sponsor limits indirect (F&A) costs but allows some costs normally charged as indirect (F&A) to be charged as direct (e.g., administrative or accounting costs), then allowable costs are to be included in the direct cost budget.

Clinical trials funded by private sector sponsors will be charged the established clinical trial indirect (F&A) cost rate regardless of location. In order for proposals and awards for clinical trials to include an indirect (F&A) cost rate less than the established clinical trial indirect (F&A) rate, a waiver of indirect (F&A) costs must be approved. In such cases, the procedure under item two (2) above should be followed.

Except for clinical trials, the on-campus indirect (F&A) cost rate is to be used for projects conducted entirely on-campus and the off-campus rate for projects conducted entirely off-campus. When a project is conducted partly on-campus and partly off-campus, the on-campus rate is applied to the portion conducted on-campus and the off-campus rate to the portion conducted off-campus. A project is partly off-campus if an off-campus site is used for a period of at least 90 consecutive days, and during that period at least 20% of project salaries and wages are expended at that site. The off-campus portion is determined by dividing the salaries and wages expended for off-campus performance by the total salaries and wages.

If sponsor terms and conditions allow funds to be re-budgeted from a category included in the direct cost base to a category excluded from the direct cost base (or vice versa), a corresponding adjustment must also be made to the indirect (F&A) cost budget.

Indirect (Facilities and Administrative) Distribution Percentage

The credit distribution recorded on a proposal is entered into the Research Foundation Business System when accounts are established.

SPS prepares a report for Financial Management that provides the credit distribution percentages.

A one-fiscal year (FY) lag ensues between the time that indirect (F&A) is credited in the Business System and subsequently distributed to university entities (i.e., indirect (F&A) credited in FY 2013/14 is distributed in FY 2014/15).

Requests to change the credit distribution indicated in the proposal will be honored, provided the requested changes do not affect a prior fiscal year indirect (F&A) distribution, and the appropriate provost, vice president, or dean endorsements have been obtained.

On a single-investigator award, a percentage of the indirect (F&A) recovered is distributed to the provost, vice president, or dean. On a multi-investigator award, a percentage of the indirect (F&A) recovered is distributed pro rata to the provost, vice presidents, or deans.

Forms

Related Links

Revision History

December 2015

Updated the policy to:

Reflect the current practice of distributing indirect (F&A) cost recovery in the year following the fiscal year the indirect (F&A) was charged; this replaces the previous practice that included a two-year lag

Clarify that a not-for-profit sponsor’s published rate is used when it differs from the federal indirect (F&A) cost rate and is used for all awardees